N-30D 1 srtfs.txt TAX-FREE SHORT-INTERMEDIATE FUND Semiannual Report - Financial Statements T. Rowe Price Tax-Free Short-Intermediate Fund August 31, 2002 T. Rowe Price Tax-Free Short-Intermediate Fund -------------------------------------------------------------------------------- Unaudited Financial Highlights For a share outstanding throughout each period -------------------------------------------------------------------------------- 6 Months Year Ended Ended 8/31/02 2/28/02 2/28/01 2/29/00 2/28/99 2/28/98 -------------------------------------------------------------------------------- NET ASSET VALUE Beginning of period $ 5.48 $ 5.38 $ 5.20 $ 5.39 $ 5.37 $ 5.35 Investment activities Net investment income (loss) 0.10 0.21 0.23 0.21 0.22 0.22 Net realized and unrealized gain (loss) 0.04 0.10 0.18 (0.18) 0.04 0.05 Total from investment activities 0.14 0.31 0.41 0.03 0.26 0.27 Distributions Net investment income (0.10) (0.21) (0.23) (0.21) (0.22) (0.22) Net realized gain (0.01) -- -- (0.01) (0.02) (0.03) Total distributions (0.11) (0.21) (0.23) (0.22) (0.24) (0.25) NET ASSET VALUE End of period $ 5.51 $ 5.48 $ 5.38 $ 5.20 $ 5.39 $ 5.37 ----------------------------------------------------------------- Ratios/Supplemental Data Total return^ 2.63% 5.92% 7.97% 0.67% 4.90% 5.28% Ratio of total expenses to average net assets 0.52%! 0.52% 0.53% 0.53% 0.53% 0.54% Ratio of net investment income (loss) to average net assets 3.66%! 3.92% 4.27% 4.07% 4.06% 4.23% Portfolio turnover rate 19.4%! 30.0% 40.7% 9.7% 39.9% 76.8% (check mark) Net assets, end of period (in thousands) $538,922 $471,780 $415,813 $404,634 $459,319 $438,951 ^ Total return reflects the rate that an investor would have earned on an investment in the fund during each period, assuming reinvestment of all distributions. (checkmark) Excludes the effect of the acquisition of the Virginia Short-Term Bond Funds assets. ! Annualized The accompanying notes are an integral part of these financial statements. -------------------------------------------------------------------------------- T. Rowe Price Tax-Free Short-Intermediate Fund -------------------------------------------------------------------------------- Unaudited August 31, 2002 Statement of Net Assets Par Value -------------------------------------------------------------------------------- In thousands ALABAMA 2.5% Alabama Federal Highway Fin. Auth. 5.00%, 3/1/08 (MBIA Insured) $ 5,000 $ 5,495 Decatur Ind. Dev. Board, British Petroleum VRDN (Currently 2.00%) (triangle) 1,300 1,300 Huntsville Solid Waste Disposal Auth. 5.75%, 10/1/05 (MBIA Insured) (triangle) 3,485 3,837 Selma Ind. Dev. Board, Int'l. Paper, 3.50%, 7/15/03 3,000 3,018 Total Alabama (Cost $13,038) 13,650 ALASKA 1.1% Alaska Housing Fin., 5.35%, 12/1/07 (triangle) 1,630 1,755 Alaska Student Loan, 5.50%, 7/1/05 (AMBAC Insured) (triangle) 2,500 2,678 Valdez Marine Terminal, Phillips Petroleum, 2.90%, 1/1/03 1,400 1,399 Total Alaska (Cost $5,550) 5,832 ARIZONA 2.6% Arizona School Fac. Board, 5.50%, 7/1/13 1,910 2,153 Arizona Transportation Board, 5.00%, 7/1/03 1,525 1,571 Salt River Agricultural Improvement & Power 5.00%, 1/1/04 4,200 4,388 5.75%, 1/1/08 2,000 2,268 6.50%, 1/1/04 3,300 3,512 Total Arizona (Cost $13,356) 13,892 CALIFORNIA 0.4% California Statewide CDA, Kaiser Permanente, 3.70%, 6/1/05 2,000 2,034 Total California (Cost $2,039) 2,034 COLORADO 2.9% Colorado DOT, 5.375%, 6/15/15 5,420 6,032 Denver City & County Airport 6.00%, 11/15/03 (MBIA Insured) (triangle) 3,965 4,172 6.75%, 11/15/13 (triangle) 5,080 5,221 Total Colorado (Cost $15,100) 15,425 CONNECTICUT 0.8% Connecticut Special Tax Obligation 5.375%, 10/1/12 (FSA Insured) $ 2,500 $ 2,821 Mohegan Tribe Indians, 5.50%, 1/1/06 1,600 1,662 Total Connecticut (Cost $4,349) 4,483 DELAWARE 0.2% Delaware, GO, 5.25%, 4/1/05 1,120 1,212 Total Delaware (Cost $1,132) 1,212 DISTRICT OF COLUMBIA 1.3% District of Columbia, GO, 5.20%, 6/1/04 (AMBAC Insured) 1,250 1 ,325 Metropolitan Washington D.C. Airports Auth. 5.00%, 10/1/03 (triangle) 860 888 5.50%, 10/1/04 (FGIC Insured) (triangle) 1,640 1,760 5.50%, 10/1/05 (triangle) 1,750 1,898 5.50%, 10/1/12 (FGIC Insured) (triangle) 965 1,077 Total District of Columbia (Cost $6,721) 6,948 FLORIDA 3.9% Broward County Resource Recovery, 5.00%, 12/1/05 4,650 4,971 Dade County Aviation, Miami Int'l. Airport 5.75%, 10/1/04 (FSA Insured) (triangle) 5,000 5,399 Florida, GO, 5.25%, 7/1/05 (FGIC Insured) 1,940 2,110 Florida Dept. of Natural Resources, Documentary Stamp Tax 5.00%, 7/1/12 (AMBAC Insured) 4,000 4,360 Reedy Creek Improvement Dist. 5.00%, 6/1/04 (AMBAC Insured) 4,000 4,234 Total Florida (Cost $20,087) 21,074 GEORGIA 5.5% Atlanta Airport Fac., 6.25%, 1/1/05 (AMBAC Insured) 6,220 6,817 DeKalb County Water & Sewage, 6.125%, 10/1/04 5,275 5,755 Georgia, GO 5.25%, 10/1/03 2,750 2,864 5.75%, 7/1/04 5,000 5,374 Municipal Electric Auth. of Georgia 5.00%, 1/1/04 $ 530 $ 554 5.00%, 1/1/04 (Escrowed to Maturity) 5,070 5,289 5.25%, 1/1/03 (AMBAC Insured) 2,850 2,887 Total Georgia (Cost $28,275) 29,540 HAWAII 0.8% Hawaii Airport System, 6.125%, 7/1/05 (FGIC Insured) (triangle) 4,000 4,410 Total Hawaii (Cost $4,057) 4,410 ILLINOIS 4.5% Chicago Public Building Commission, Chicago Board of Ed. 5.125%, 2/1/04 (FGIC Insured) 1,515 1,588 Illinois 5.50%, 6/15/05 4,195 4,586 6.00%, 6/15/06 2,000 2,256 Illinois, GO 5.00%, 8/1/03 4,320 4,460 5.375%, 7/1/13 (MBIA Insured) 3,450 3,859 5.50%, 8/1/16 (MBIA Insured) 1,650 1,824 Metropolitan Pier & Expo Auth., McCormick Place 6.50%, 6/15/27 (Prerefunded 6/15/03!) 4,000 4,241 Southwestern Illinois Dev. Auth. Anderson Hosp. 5.25%, 8/15/05 485 507 5.25%, 8/15/06 510 534 5.50%, 8/15/07 535 565 Total Illinois (Cost $23,638) 24,420 INDIANA 0.6% Indianapolis Airport Auth. IDR, Federal Express Corp. 7.10%, 1/15/17 (triangle) 3,000 3,200 Total Indiana (Cost $3,169) 3,200 IOWA 0.2% Iowa Fin. Auth., VRDN (Currently 1.48%) (triangle) $ 1,090 $ 1,090 Total Iowa (Cost $1,090) 1,090 KANSAS 2.3% Kansas DOT 5.10%, 3/1/03 500 509 5.40%, 3/1/08 4,850 5,431 5.50%, 9/1/08 4,000 4,539 7.25%, 3/1/05 1,500 1,691 Total Kansas (Cost $12,078) 12,170 KENTUCKY 4.3% Kenton County Airport Board, Delta Airlines 7.50%, 2/1/20 (triangle) 2,630 2,367 Kentucky Economic Dev. Fin. Auth. Catholic Healthcare Partners 4.50%, 10/1/02 945 947 Kentucky Property & Building Commission 5.00%, 8/1/04 7,170 7,618 5.25%, 10/1/04 2,500 2,681 5.50%, 8/1/11 (FSA Insured) 4,000 4,559 Kentucky Turnpike Auth., 5.30%, 7/1/04 (AMBAC Insured) 4,750 5,059 Total Kentucky (Cost $22,597) 23,231 LOUISIANA 1.8% Louisiana, GO 5.00%, 4/15/03 (AMBAC Insured) 1,000 1,022 5.50%, 4/15/07 (AMBAC Insured) 5,000 5,591 Plaquemines Parish, British Petroleum VRDN (Currently 2.00%) (triangle) 1,500 1,500 St. Charles Parish PCR, Shell Oil VRDN (Currently 2.00%) (triangle) 300 300 West Feliciana Parish PCR, Entergy, 5.65%, 9/1/04 1,225 1,261 Total Louisiana (Cost $9,100) 9,674 MAINE 0.8% Maine, GO, 5.50%, 6/15/04 $ 4,000 $ 4,272 Total Maine (Cost $4,037) 4,272 MARYLAND 2.1% Maryland, GO, 5.00%, 7/15/06 1,500 1,648 Maryland DOT 5.50%, 9/1/06 1,265 1,414 5.50%, 2/1/09 7,370 8,342 Total Maryland (Cost $10,810) 11,404 MASSACHUSETTS 1.4% Massachusetts Dev. Fin. Agency American Ref-Fuel 5.00%, 1/1/04 (MBIA Insured) (triangle) 3,000 3,126 Massachusetts General Hosp. 5.75%, 8/1/03 700 724 5.75%, 8/1/04 500 532 Massachusetts Municipal Wholesale Electric 5.25%, 7/1/04 (MBIA Insured) 3,000 3,192 Total Massachusetts (Cost $7,403) 7,574 MICHIGAN 1.4% Michigan Municipal Bond Auth., 5.50%, 10/1/04 1,310 1,414 Michigan State Building Auth., GO 5.25%, 10/15/04 2,585 2,776 6.25%, 10/1/03 (AMBAC Insured) 3,200 3,367 Total Michigan (Cost $7,254) 7,557 MINNESOTA 2.3% Minneapolis-St. Paul Metro Airport Commission 5.50%, 1/1/10 (FGIC Insured) (triangle) 3,305 3,662 5.625%, 1/1/12 (FGIC Insured) (triangle) 5,315 5,829 Northwest Airlines, 6.50%, 4/1/05 (triangle) 1,000 942 Minnesota, GO, 5.75%, 8/1/05 2,000 2,210 Total Minnesota (Cost $12,327) 12,643 MISSOURI 0.1% St. Louis Airport, 6.25%, 1/1/03 $ 765 $ 774 Total Missouri (Cost $766) 774 NEBRASKA 1.3% Omaha Public Power Dist., Nebraska Electric 5.25%, 2/1/04 3,000 3,153 Univ. of Nebraska Fac., 5.25%, 7/15/06 3,720 4,111 Total Nebraska (Cost $6,774) 7,264 NEVADA 0.6% Clark County Airport, McCarran Int'l. Airport VRDN (Currently 1.98%) (FGIC Insured) (triangle) 3,000 3,000 Total Nevada (Cost $3,000) 3,000 NEW JERSEY 4.1% New Jersey GO, 5.25%, 3/1/08 1,040 1,156 TRAN, 3.00%, 6/12/03 5,000 5,062 New Jersey Transit Corp. 5.25%, 9/15/03 (AMBAC Insured) 4,955 5,150 5.50%, 2/1/06 (AMBAC Insured) 5,000 5,512 COP, 5.00%, 9/15/04 (AMBAC Insured) 2,025 2,160 New Jersey Transportation Trust Fund Auth. 5.75%, 6/15/11 (Escrowed to Maturity) 2,750 3,194 Total New Jersey (Cost $21,166) 22,234 NEW MEXICO 1.4% Bernalillo County Gross Receipts 5.75%, 4/1/26 (Prerefunded 4/1/06!) 5,000 5,581 New Mexico Ed. Assistance Foundation, 5.50%, 11/1/10 (triangle) 1,750 1,780 Total New Mexico (Cost $6,787) 7,361 NEW YORK 8.8% Dormitory Auth. of the State of New York 5.00%, 2/15/03 $ 2,210 $ 2,245 5.50%, 7/1/03 2,860 2,956 6.00%, 8/15/03 10,865 11,318 6.00%, 8/15/03 (Escrowed to Maturity) 40 42 Nassau County, GO, 7.00%, 3/1/04 2,810 2,986 New York City, GO 5.25%, 8/1/03 4,040 4,170 6.75%, 8/1/04 4,300 4,679 7.00%, 8/1/04 4,000 4,367 New York City Transitional Fin. Auth., 5.00%, 2/1/10 4,850 5,295 New York State Thruway Auth. 5.25%, 4/1/10 (MBIA Insured) 5,000 5,568 5.50%, 3/15/13 3,500 3,954 Total New York (Cost $46,256) 47,580 NORTH CAROLINA 3.0% Charlotte, 5.75%, 2/1/11 (Prerefunded 2/1/04!) 2,040 2,200 North Carolina, GO, 5.00%, 9/1/03 5,750 5,958 North Carolina Eastern Municipal Power Agency 5.45%, 1/1/04 1,830 1,884 7.00%, 1/1/08 2,010 2,302 North Carolina Municipal Power Agency 5.90%, 1/1/03 3,000 3,038 6.00%, 1/1/04 1,000 1,032 Total North Carolina (Cost $16,058) 16,414 NORTH DAKOTA 0.5% Burleigh County, MedCenter One 5.00%, 5/1/03 (MBIA Insured) 2,380 2,435 Total North Dakota (Cost $2,390) 2,435 OHIO 1.9% Cuyahoga County, GO, 5.50%, 11/15/05 $ 1,400 $ 1,547 Ohio 4.50%, 6/15/03 1,000 1,024 GO, 5.25%, 5/1/05 2,495 2,704 Ohio Air Quality Dev. Auth., PCR FirstEnergy, 5.80%, 12/1/04 2,000 2,059 Steubenville Hosp. Fac. Trinity Health 5.45%, 10/1/03 640 663 5.50%, 10/1/04 585 622 5.55%, 10/1/05 630 680 5.60%, 10/1/06 730 797 Total Ohio (Cost $9,558) 10,096 OKLAHOMA 0.1% Oklahoma Transportation Auth. 5.25%, 1/1/16 (AMBAC Insured) 600 654 Total Oklahoma (Cost $619) 654 OREGON 0.4% Oregon, GO, TAN, 3.25%, 5/1/03 2,000 2,025 Total Oregon (Cost $2,016) 2,025 PENNSYLVANIA 4.9% Beaver County IDA, PCR FirstEnergy, 4.85%, 6/1/04 4,000 4,036 Montgomery County IDA, PCR, 5.20%, 10/1/04 2,000 2,102 Pennsylvania, GO 5.00%, 9/15/04 2,500 2,667 5.00%, 9/15/06 6,000 6,592 6.00%, 7/1/09 4,375 5,098 Pennsylvania Intergovernmental Cooperative Auth. 5.00%, 6/15/03 (FGIC Insured) 4,950 5,090 Philadelphia Redev. Auth., Schuylkill Apartments Project 5.10%, 12/1/03 (triangle) 1,000 1,003 Total Pennsylvania (Cost $25,689) 26,588 PUERTO RICO 0.1% Puerto Rico Ind., Medical & Environmental IDR, PCR Intel Corp., 4.25%, 9/1/03 $ 500 $ 509 Total Puerto Rico (Cost $500) 509 SOUTH CAROLINA 2.4% South Carolina, GO 5.00%, 7/1/10 6,525 7,224 5.75%, 1/1/07 4,960 5,590 Total South Carolina (Cost $12,267) 12,814 TENNESSEE 0.3% Knox County Health, Ed. & Housing Fac. Board Catholic Healthcare Partners 4.50%, 10/1/02 1,580 1,584 Total Tennessee (Cost $1,582) 1,584 TEXAS 10.8% Austin Utilities 5.75%, 11/15/03 (FSA Insured) 4,570 4,804 5.75%, 11/15/03 (FSA Insured) (Escrowed to Maturity) 430 452 Brazos River Harbor Navigation Dist., IDR Dow Chemical, 4.95%, 5/15/07 (triangle) 1,500 1,521 Dallas-Fort Worth Int'l. Airport Fac. 5.625%, 11/1/12 (FGIC Insured) (triangle) 5,000 5,569 American Airlines, 6.05%, 11/1/05 (triangle) 750 606 Fort Worth Water & Sewer, 5.50%, 2/15/05 4,225 4,576 Gulf Coast Waste Disposal Auth. British Petroleum VRDN (Currently 2.00%) (triangle) 1,500 1,500 Harris County Health Fac. Dev. Corp. St. Lukes Episcopal Hosp. 5.50%, 2/15/11 2,140 2,360 5.50%, 2/15/12 2,000 2,196 Houston, GO, 5.25%, 3/1/05 $ 6,500 $ 7,009 Lower Colorado River Auth., 6.00%, 5/15/07 (FSA Insured) 5,000 5,704 North Harris Montgomery Community College, GO 5.375%, 2/15/14 (FGIC Insured) 4,485 4,952 San Antonio, GO, 5.00%, 8/1/10 5,850 6,418 Texas, GO, TRAN, 2.75%, 8/29/03 5,000 5,064 Tomball Hosp. Auth. 5.50%, 7/1/03 800 816 5.50%, 7/1/04 800 831 5.50%, 7/1/05 1,300 1,370 Univ. of Texas, Fin. Systems, 5.25%, 8/15/04 2,375 2,538 Total Texas (Cost $56,134) 58,286 VIRGINIA 9.5% Arlington County IDA Arlington Waste to Energy 5.25%, 1/1/03 (FSA Insured) 1,000 1,013 5.25%, 1/1/04 (FSA Insured) 1,000 1,049 Hosp. Center 5.50%, 7/1/09 3,200 3,535 5.50%, 7/1/12 3,760 4,137 Bedford County IDA, PCR, Georgia-Pacific, 4.60%, 8/1/04 1,170 1,182 Charles County IDA, Waste Management, 6.25%, 4/1/12 (triangle) 750 783 Charles County IDA, IDR, Waste Management 4.875%, 2/1/09 (triangle) 750 727 Chesterfield County IDA, Bon Secours Health System 5.70%, 11/15/03 3,600 3,740 Fairfax County, GO, 5.50%, 12/1/05 2,100 2,328 Halifax County IDA, Old Dominion Electric 5.25%, 12/1/02 (triangle)** 1,130 1,139 Henrico County Economic Dev. Auth., Regional Jail 5.00%, 11/1/02 ** 585 589 Hopewell IDA Westport Convalescent Center 5.45%, 10/1/02 220 221 5.60%, 10/1/03 235 245 Louisa IDA, Virginia Electric & Power, 3.40%, 3/1/04 (triangle) 3,000 3,007 Metropolitan Washington D.C. Airports Auth. 5.75%, 10/1/03 (FGIC Insured) (triangle) $ 300 $ 313 6.40%, 10/1/04 (MBIA Insured) (triangle) 1,350 1,382 Newport News, GO 5.50%, 1/15/03 1,000 1,016 5.50%, 5/1/04 500 532 5.50%, 5/1/07 1,875 2,107 Norfolk, GO, 4.80%, 6/1/03 4,500 4,616 Southeastern Public Service Auth., 5.00%, 7/1/03 545 556 Virginia Public School Auth., GO, 5.00%, 1/1/04 1,000 1,045 Virginia Biotechnology Research Park Auth., 5.00%, 9/1/03 1,950 2,021 Virginia Ed. Loan Auth., 5.60%, 3/1/03 (Escrowed to Maturity) (triangle) 2,050 2,092 Virginia HDA 4.90%, 1/1/03 200 202 5.125%, 7/1/03 (triangle) 865 887 Virginia Port Auth., 5.75%, 7/1/03 (triangle) 1,545 1,599 Virginia Public Building Auth., 5.70%, 8/1/03 500 520 Virginia Public School Auth., GO 5.00%, 8/1/04 1,000 1,063 5.25%, 8/1/05 1,500 1,637 Virginia Transportation Board, 5.50%, 10/1/04 5,500 5,936 Total Virginia (Cost $49,497) 51,219 WASHINGTON 2.4% Clark County Public Utility Dist. 5.00%, 1/1/04 (AMBAC Insured) 1,650 1,722 King County, GO, 5.25%, 12/1/07 3,195 3,577 Washington Public Power Supply System 5.25%, 7/1/03 3,000 3,090 5.80%, 7/1/03 (AMBAC Insured) 4,250 4,407 Total Washington (Cost $12,318) 12,796 WEST VIRGINIA 0.9% Putnam County PCR, Appalachian Power, 6.60%, 7/1/19 1,500 1,532 West Virginia Hospital Fin. Auth. Charleston Area Medical Center 5.90%, 9/1/06 $ 1,155 $ 1,272 6.30%, 9/1/03 1,000 1,042 6.50%, 9/1/05 815 901 Total West Virginia (Cost $4,511) 4,747 WISCONSIN 1.1% Milwaukee Metropolitan Sewage Dist., GO, 6.25%, 10/1/05 3,000 3,369 Wisconsin HEFA Froedert & Community Health 5.50%, 10/1/07 1,000 1,087 5.50%, 10/1/08 1,250 1,363 Total Wisconsin (Cost $5,477) 5,819 Total Investments in Securities 98.3% of Net Assets (Cost $510,572) 529,934 Futures Contracts Contract Unrealized Expiration Value Gain (Loss) In thousands Short, 35 five year U.S. Treasury contracts, $85,000 of 5.00% Henrico County Economic Dev. Auth. Bonds pledged as initial margin 12/02 (3,891) (13) Short, 35 ten year U.S. Treasury contracts, $60,000 of 5.00% Henrico County Economic Dev. Auth. and $30,000 of 5.25% Halifax County IDA, Old Dominion Electric Bonds pledged as initial margin 12/02 (3,912) (14) Net payments (receipts) of variation margin to date 16 Variation margin receivable (payable) on open futures contracts (11) Other Assets Less Liabilities 8,999 NET ASSETS $538,922 -------- Net Assets Consist of: Undistributed net investment income (loss) $ 100 Undistributed net realized gain (loss) (138) Net unrealized gain (loss) 19,335 Paid-in-capital applicable to 97,784,844 shares of $0.01 par value capital stock outstanding; 1,000,000,000 shares authorized 519,625 NET ASSETS $538,922 -------- NET ASSET VALUE PER SHARE $ 5.51 -------- (triangle) Interest subject to alternative minimum tax ** All or a portion of this security is pledged to cover margin requirements on futures contracts at August 31, 2002. ! Used in determining portfolio maturity AMBAC Ambac Assurance Corp. CDA Community Development Administration COP Certificates of Participation DOT Department of Transportation FGIC Financial Guaranty Insurance Company FSA Financial Security Assurance Inc. GO General Obligation HDA Housing Development Authority HEFA Health & Educational Facility Authority IDA Industrial Development Authority/Agency IDR Industrial Development Revenue MBIA MBIA Insurance Corp. PCR Pollution Control Revenue TAN Tax Anticipation Note TRAN Tax Revenue Anticipation Note VRDN Variable-Rate Demand Note The accompanying notes are an integral part of these financial statements. -------------------------------------------------------------------------------- T. Rowe Price Tax-Free Short-Intermediate Fund -------------------------------------------------------------------------------- Statement of Operations -------------------------------------------------------------------------------- In thousands 6 Months Ended 8/31/02 -------------------------------------------------------------------------------- Investment Income (Loss) Interest income $ 10,178 Expenses Investment management 1,023 Shareholder servicing 135 Custody and accounting 59 Registration 21 Prospectus and shareholder reports 12 Legal and audit 7 Proxy and annual meeting 5 Directors 4 Miscellaneous 2 Total expenses 1,268 Net investment income (loss) 8,910 Realized and Unrealized Gain (Loss) Net realized gain (loss) Securities 920 Futures (495) Net realized gain (loss) 425 Change in net unrealized gain (loss) Securities 3,184 Futures (27) Change in net unrealized gain (loss) 3,157 Net realized and unrealized gain (loss) 3,582 INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 12,492 -------- The accompanying notes are an integral part of these financial statements. -------------------------------------------------------------------------------- T. Rowe Price Tax-Free Short-Intermediate Fund -------------------------------------------------------------------------------- Statement of Changes in Net Assets -------------------------------------------------------------------------------- In thousands 6 Months Year Ended Ended 8/31/02 2/28/02 -------------------------------------------------------------------------------- Increase (Decrease) in Net Assets Operations Net investment income (loss) $ 8,910 $ 16,999 Net realized gain (loss) 425 2,586 Change in net unrealized gain (loss) 3,157 5,620 Increase (decrease) in net assets from operations 12,492 25,205 Distributions to shareholders Net investment income (8,899) (16,962) Net realized gain (857) -- Decrease in net assets from distributions (9,756) (16,962) Capital share transactions * Shares sold 113,093 134,142 Distributions reinvested 7,686 13,006 Shares redeemed (56,373) (99,424) Increase (decrease) in net assets from capital share transactions 64,406 47,724 Net Assets Increase (decrease) during period 67,142 55,967 Beginning of period 471,780 415,813 End of period $538,922 $471,780 ----------------------------- *Share information Shares sold 20,667 24,674 Distributions reinvested 1,410 2,394 Shares redeemed (10,348) (18,318) Increase (decrease) in shares outstanding 11,729 8,750 The accompanying notes are an integral part of these financial statements. -------------------------------------------------------------------------------- T. Rowe Price Tax-Free Short Intermediate Fund -------------------------------------------------------------------------------- Unaudited August 31, 2002 Notes to Financial Statements NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES T. Rowe Price Tax-Free Short-Intermediate Fund, Inc. (the fund) is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company and commenced operations on December 23, 1983. The fund seeks to provide, consistent with modest price fluctuation, a high level of income exempt from federal income taxes by investing primarily in short- and intermediate-term, investment-grade municipal securities. The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America, which require the use of estimates made by fund management. Valuation Debt securities are generally traded in the over-the-counter market. Securities are valued at prices furnished by dealers who make markets in such securities or by an independent pricing service, which considers yield or price of bonds of comparable quality, coupon, maturity, and type, as well as prices quoted by dealers who make markets in such securities. Financial futures contracts are valued at closing settlement prices. Assets and liabilities for which the above valuation procedures are inappropriate or are deemed not to reflect fair value are stated at fair value as determined in good faith by or under the supervision of the officers of the fund, as authorized by the Board of Directors. Premiums and Discounts Premiums and discounts on municipal securities are amortized for financial reporting purposes. Expenses Paid Indirectly Credits earned on temporarily uninvested cash balances at the custodian are used to reduce the fund's custody charges. Other Income and expenses are recorded on the accrual basis. Investment transactions are accounted for on the trade date. Realized gains and losses are reported on the identified cost basis. Distributions to shareholders are recorded by the fund on the ex-dividend date. Payments ("variation margin") made or received by the fund to settle the daily fluctuations in the value of futures contracts are recorded as unrealized gains or losses until the contracts are closed. Unrealized gains and losses on futures contracts are included in Change in net unrealized gain or loss in the accompanying financial statements. NOTE 2 - INVESTMENT TRANSACTIONS Consistent with its investment objective, the fund engages in the following practices to manage exposure to certain risks or enhance performance. The investment objective, policies, program, and risk factors of the fund are described more fully in the fund's prospectus and Statement of Additional Information. Futures Contracts During the six months ended August 31, 2002, the fund was a party to futures contracts, which provide for the future sale by one party and purchase by another of a specified amount of a specific financial instrument at an agreed upon price, date, time, and place. Risks arise from possible illiquidity of the futures market and from movements in security values and/or interest rates. Other Purchases and sales of portfolio securities, other than short-term securities, aggregated $108,489,000 and $45,500,000, respectively, for the six months ended August 31, 2002. NOTE 3 - FEDERAL INCOME TAXES No provision for federal income taxes is required since the fund intends to continue to qualify as a regulated investment company and distribute to shareholders all of its income and capital gains. Federal income tax regulations differ from generally accepted accounting principles; therefore, distributions determined in accordance with tax regulations may differ in amount or character from net investment income and realized gains for financial reporting purposes. Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Temporary differences are not adjusted. The amount and character of tax-basis distributions and composition of net assets are finalized at fiscal year-end; accordingly, tax-basis balances have not been determined as of August 31, 2002. At August 31, 2002, the cost of investments for federal income tax purposes was $510,521,000. Net unrealized gain aggregated $19,385,000 at period-end, of which $19,937,000 related to appreciated investments and $552,000 related to depreciated investments. NOTE 4 - RELATED PARTY TRANSACTIONS The fund is managed by T. Rowe Price Associates, Inc. (the manager or Price Associates), a wholly owned subsidiary of T. Rowe Price Group. The investment management agreement between the fund and the manager provides for an annual investment management fee, which is computed daily and paid monthly. The fee consists of an individual fund fee, equal to 0.10% of the fund's average daily net assets, and the fund's pro-rata share of a group fee. The group fee is calculated based on the combined net assets of certain mutual funds sponsored by Price Associates (the group) applied to a graduated fee schedule, with rates ranging from 0.48% for the first $1 billion of assets to 0.295% for assets in excess of $120 billion. The fund's portion of the group fee is determined by the ratio of its net assets to those of the group. At August 31, 2002, the effective annual group fee rate was 0.32%, and investment management fee payable totaled $186,000. In addition, the fund has entered into service agreements with Price Associates and a wholly owned subsidiary of Price Associates (collectively, Price). Price Associates computes the daily share price and maintains the financial records of the fund. T. Rowe Price Services, Inc. provides shareholder and administrative services in its capacity as the fund's transfer and dividend disbursing agent. Expenses incurred pursuant to these service agreements totaled $124,000 for the six months ended August 31, 2002, of which $25,000 was payable at period-end. T. Rowe Price Investment Services and Information -------------------------------------------------------------------------------- Investment Services and Information KNOWLEDGEABLE SERVICE REPRESENTATIVES By Phone 1-800-225-5132. Available Monday through Friday from 7 a.m. until midnight ET and weekends from 8:30 a.m. until 5 p.m. ET. In Person. Available in T. Rowe Price Investor Centers. Please call a service representative at 1-800-225-5132 or visit the Web at www.troweprice.com/investorcenter to locate a center near you. ACCOUNT SERVICES Automated 24-Hour Services Including Tele*Access(registered trademark) and Account Access through the T. Rowe Price Web site on the Internet. Address: www.troweprice.com. Automatic Investing. From your bank account or paycheck. Automatic Withdrawal. Scheduled, automatic redemptions. IRA Rebalancing. Ensuring that your accounts reflect your desired asset allocation. BROKERAGE SERVICES * Individual Investments. Stocks, bonds, options, precious metals, and other securities at a savings over full-service commission rates. INVESTMENT INFORMATION Consolidated Statement. Overview of all of your accounts. Shareholder Reports. Manager reviews of their strategies and results. T. Rowe Price Report. Quarterly investment newsletter. Performance Update. Quarterly review of all T. Rowe Price fund results. Insights. Educational reports on investment strategies and markets. Investment Guides. Asset Mix Worksheet, Diversifying Overseas: A Guide to International Investing, Retirement Planning Kit, Retirement Readiness Guide, and Tax Considerations Guide. * T. Rowe Price Brokerage is a division of T. Rowe Price Investment Services, Inc., Member NASD/SIPC. T. Rowe Price Planning Tools and Services -------------------------------------------------------------------------------- T. Rowe Price Retirement Services T. Rowe Price offers unique retirement resources that can help you meet a broad variety of planning challenges. Our retirement tools are suitable for individuals, the self-employed, small businesses, corporations, and nonprofit organizations. We also provide recordkeeping, communications, and investment management services. For more information, call us at 1-800-IRA-5000, or visit our Web site at www.troweprice.com. PLANNING TOOLS AND SERVICES T. Rowe Price(registered trademark) Retirement Income Manager* helps retirees or those within two years of retirement determine how much income they can draw down in retirement. The program uses extensive statistical analysis and the input of a T. Rowe Price Advisory Counselor to suggest an income plan that best meets your objectives. Retirement Income Calculator. This free calculator, incorporating the analytic approach of the T. Rowe Price Retirement Income Manager program, simulates 500 potential market scenarios to estimate the probability of maintaining an income strategy throughout retirement. Rollover Investment Service* offers asset allocation and fund selection advice to those planning a 401(k) rollover from a previous employer after changing jobs or retiring. IRA Rebalancing Service. T. Rowe Price will rebalance your IRA at the end of every quarter by exchanging shares between mutual fund accounts. This ensures that your accounts retain your desired asset allocation. Quality Information. Thousands of investors have made their personal choices with the help of our Retirement Readiness Guide, Retirement Planning Kit, IRA Insights, and Retirement Planning Worksheet. INVESTMENT VEHICLES Individual Retirement Accounts (IRAs) No-Load Variable Annuities Small Business Retirement Plans -------------------------------------------------------------------------------- T. Rowe Price Web Services -------------------------------------------------------------------------------- www.troweprice.com ACCOUNT INFORMATION Account Access allows you to access, in a secure environment, all of your T. Rowe Price mutual fund, brokerage, variable annuity, and workplace retirement accounts with a single login. AccountMinder is a personal page, with one password, that gives you access to all your online financial information and other records from the secure T. Rowe Price Account Access site. FINANCIAL TOOLS AND CALCULATORS College Investment Calculator. This interactive tool allows you to estimate simultaneously the college costs for as many as five children. Morningstar(registered trademark) Portfolio Tracker(servicemark). See how your investments are performing at any time. After you enter ticker symbols for your stocks and mutual funds, Portfolio Tracker provides information on prices, market value, and any applicable Morningstar ratings. Investment Strategy Planner. This planning tool can help you develop and implement an asset allocation strategy that's appropriate for you. Retirement Income Calculator. This free calculator simulates 500 potential market scenarios to estimate the probability of maintaining an income strategy throughout retirement. INVESTMENT TRACKING AND INFORMATION My TRP e-Updates. This free e-mail service offers timely market reports, important information about investing, and the latest updates on the T. Rowe Price funds and services. Morningstar(registered trademark) Portfolio Watchlist(servicemark). Like the Portfolio Tracker, the Watchlist allows you to see how your investments are performing. After entering your ticker symbols, the Watchlist automatically provides you with prices, price changes in dollars and percentages, target highs and lows, and target volume. Morningstar(registered trademark) Portfolio X-Ray(servicemark). This comprehensive tool goes below the surface to give you an in-depth examination of all your investments. It analyzes your portfolio by asset allocation, stock sector, fees and expenses, stock statistics, world regions, and top holdings. -------------------------------------------------------------------------------- T. Rowe Price Mutual Funds -------------------------------------------------------------------------------- STOCK FUNDS Domestic Blue Chip Growth* Capital Appreciation Capital Opportunity Developing Technologies Diversified Small-Cap Growth Dividend Growth Equity Income* Equity Index 500 Extended Equity Market Index Financial Services Growth & Income Growth Stock* Health Sciences Media & Telecommunications Mid-Cap Growth* Mid-Cap Value New America Growth New Era New Horizons Real Estate Science & Technology* Small-Cap Stock* Small-Cap Value*! Spectrum Growth Tax-Efficient Growth Tax-Efficient Multi-Cap Growth Total Equity Market Index Value* BLENDED ASSET FUNDS Balanced Personal Strategy Balanced Personal Strategy Growth Personal Strategy Income Tax-Efficient Balanced BOND FUNDS Domestic Taxable Corporate Income GNMA High Yield* New Income Short-Term Bond Spectrum Income Summit GNMA U.S. Bond Index U.S. Treasury Intermediate U.S. Treasury Long-Term Domestic Tax-Free California Tax-Free Bond Florida Intermediate Tax-Free Georgia Tax-Free Bond Maryland Short-Term Tax-Free Bond Maryland Tax-Free Bond New Jersey Tax-Free Bond New York Tax-Free Bond Summit Municipal Income Summit Municipal Intermediate Tax-Free High Yield Tax-Free Income Tax-Free Intermediate Bond Tax-Free Short-Intermediate Virginia Tax-Free Bond MONEY MARKET FUNDS!! Taxable Prime Reserve Summit Cash Reserves U.S. Treasury Money Tax-Free California Tax-Free Money Maryland Tax-Free Money New York Tax-Free Money Summit Municipal Money Market Tax-Exempt Money INTERNATIONAL/GLOBAL FUNDS Stock Emerging Europe & Mediterranean Emerging Markets Stock European Stock Global Stock Global Technology International Discovery! International Equity Index International Growth & Income International Stock* Japan Latin America New Asia Spectrum International Bond Emerging Markets Bond International Bond* For more information about T. Rowe Price funds or services, please contact us directly at 1-800-225-5132. * T. Rowe Price Advisor Class available for these funds. The T. Rowe Price Advisor Class is offered only through financial intermediaries. For more information about T. Rowe Price Advisor Class funds, contact your financial professional or T. Rowe Price at 1-877-804-2315. ! Closed to new investors. !! Investments in the funds are not insured or guaranteed by the FDIC or any other government agency. Although the funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the funds. Please call for a prospectus, which contains complete information, including risks, fees, and expenses. Read it carefully before investing. T. Rowe Price Invest with Confidence (registered trademark) T. Rowe Price Investment Services, Inc. 100 East Pratt Street Baltimore, MD 21202 F56-051 8/31/02